Tesco Ponders Sale of Dunnhumby amid Consolidation Efforts

The immediate future of consumer data firm dunnhumby has been brought into question as part of ongoing consolidation efforts at its owner - troubled supermarket chain Tesco.

Reports suggest Tesco is looking into options surrounding dunnhumby after seeing a tumble in its own sales and profits over the course of 2014.

Accused of falling behind with the demands of modern shoppers, the supermarket has this week announced the closing of 43 unprofitable UK stores and plans to shelve the opening of a further 49. Tesco also said that it would be making cuts of £250 million, while ceasing the availability of a staff pension scheme.

Caring for customers

Dunnhumby has been a long-standing partner of Tesco and was critical to the success of the firm’s Clubcard scheme in the 1990s. This led to the supermarket acquiring a 53% controlling stake in the company, during 2001, for an estimated £30 million.

Only last month, PerformanceIN spoke to dunnhumby’s CEO of media services, Mark Hinds, about the prospects of omnichannel shopping and why behavioural insight will have such a huge impact on the future of retail.

Now thought to be holding a worth of around £2 billion, dunnhumby, whose analytics solutions help the likes of Tesco understand and cater for their customers, could be set to present its owner with a much-needed cash injection.

Every little helps

Dunnhumby can take solace in the fact that it is not the only member of Tesco’s business portfolio being mooted for sale. Reports suggest a deal has already been done to offload content streaming platform Blinkbox, which is set to switch across to telecoms company TalkTalk for a cut-price rate of £5 million.

The new figure might represent a profit considering that Blinkbox was purchased for £3 million by Tesco in 2011, but analysts believe it could be worth more due to significant growth in people viewing TV and movies online.

Where dunnhumby is concerned, it faces being sold on with a glowing report attached to its head. While the public awaits confirmation of earnings for 2014, dunnhumby’s most recent disclosure of revenue estimates a figure of $100 million in 2013.

Dunnhumby has also made some deals of its own as part of Tesco, taking on price intelligence firm KSS Retail in 2010 and German ad tech business Sociomantic early last year. These businesses will also be included in a potential sale which is being reviewed by Goldman Sachs.

At the time of publication, dunnhumby had not responded to PerformanceIN’s request for comment.

“Very difficult changes”

Tesco has entered a period of stern consolidation in an attempt to bounce back following a tough two years. The company appointed Dave Lewis as chief executive in September and the former Unilever veteran has already made a series of gutsy decisions regarding the group’s plans for the future.

Among those was the announcement that 49 new stores in the UK would not be opened, while many believe that some of the group’s smaller locations, falling under the Metro and Express brands, face heightened threats of closure.

In a statement released earlier this week, Lewis acknowledged that there were some “very difficult changes to make” at the company in 2015 and beyond.

“I am very conscious that the consequences of these changes are significant for all stakeholders in our business but we are facing the reality of the situation,” he added.

Helping Lewis in his turnaround quest will be Matt Davies, who is set to join the company as head of operations in UK and Ireland following a stint at fellow retailer Halford’s.

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Richard Towey

Richard serves as head of content at PerformanceIN. After many years spent covering developments from the automotive, sports, travel and finance sectors, he eventually turned his full attention to reporting on stories from the fast-evolving world of digital marketing. Richard now heads up the editorial team at PerformanceIN: the performance marketing industry's leading publication.